Revenues at dairy giant Arla Foods jumped 13.6% in the first half of 2025, despite a fall in volumes for its key brands.
Rising retail and foodservice prices helped the co-op reach €7.5bn in turnover, alongside an “exceptional” 53.7% jump in revenues at its ingredients business through its acquisition of Volac Whey Nutrition. The purchase added €137m to revenues alongside a 12% jump in the ingredient business’ like-for-like revenue, as demand for whey continued to soar.
However, Arla’s brands suffered as higher dairy prices suppressed consumer appetite: in Europe, branded volumes fell 2.4% year on year, with butters, spreads and margarine hit by an 8.3% drop.
Branded volumes in the UK underperformed wider Europe, falling 4.7% in the half. Net revenue in the UK was up 9%.
Overall volumes for the group’s brands – which include Lurpak, Arla and Castello – fell 1.5%, despite a 17.4% jump for Starbucks RTD products, which are made by Arla under licence.
The fall in branded volumes, which follows solid growth over the past two years, is expected to be temporary, according to Arla.
“Although we saw a slight decline in branded sales volumes in the first half of the year, we expect the situation to improve as we move into the second half,” said Arla Foods CFO Torben Dahl Nyholm.
As a result, the group adjusted guidance for the year from an average estimated fall of 1.5% in branded volumes to a range of -0.5% to +0.5%.
Profit share is still anticipated to fall within target range of 2.8%-3.2%.
Arla now expects to hit €15bn in revenue over the full calendar year, which will mark the 25th anniversary of Arla Foods’ creation through the merger of Danish and Swedish co-operatives MD Foods and Arla.
“Since our merger 25 years ago, we have successfully built one of the biggest dairy brands in Europe,” said Arla CEO Peder Tuborgh.
He added the company has taken further steps for growth this year, including an agreement by “very high majority” vote to merge with German dairy DMK in June 2025, which the company expects to complete in early 2026 pending regulatory approval.
Arla UK managing director Bas Padberg said the business expected market conditions to be “more difficult to navigate” in the first half.
“We’ve seen some of the highest commodity prices so far this year, which has increased the value of dairy. As a co-operative, we have to ensure our farmers get the best possible price for their milk whilst keeping nutritious dairy accessible to shoppers,” he added.
A recent glut of European milk supplies has now softened global dairy commodity prices, though retail prices remain high.
The downwards correction in commodity prices would track towards a normalisation towards historic levels when compared to retail prices, according to Tuborgh.
“[Milk production] has been suppressed for a while due to the uncertainties that farmers have rightly felt on regulation, and there have been various diseases in previous seasons: this combination has led to the fact that there was, bluntly, not enough milk in the market,” he said.
Adding that favourable harvest and weather conditions had helped production, he said there had been a “small adjustment” to price.
“What we’re seeing for the past couple of months, is that commodity prices have lowered a bit.
“In the long term, commodity prices are lower than what you get in the retail market, where the cost of operation and innovation is higher. I would say we are now in a more normal situation.”
No comments yet